Mastering the Skills: A Guide to Becoming a Successful Derivatives Lawyer

Mastering the Skills: A Guide to Becoming a Successful Derivatives Lawyer

Mastering a skill requires time, effort, and commitment. But it’s well worth the effort to achieve a level of expertise that is unique and valuable to you.

Our Derivatives Group regularly handles complex regulatory matters, including challenging agency actions and defending private action Commodity Futures Trading Commission (CFTC) enforcement cases. 

Understanding the Basics

Derivatives, which are financial instruments whose value is linked to an underlying asset, are hugely important. They have a total notional value of $610 trillion, and over-the-counter derivatives account for 95% of the market. They were central to the global economic crisis that erupted with Lehman Brothers’ bankruptcy in 2008, and their role in that crisis led to changes in how they were traded and regulated.

How to become a derivatives lawyer? A futures and derivatives lawyer’s work is transactional (preparing and negotiating contracts) and regulatory (implementing laws on a national level). Attorneys who practice this area of law tend to gravitate towards cities with a strong focus on finance and financial trading. They must be able to understand and implement a wide range of laws, including securities and commodities laws, tax laws, and even bankruptcy laws. They must also be able to handle complex legal issues, such as litigation and business fraud. Depending on their client base, a futures and derivatives lawyer may also need the skills to conduct forensic analysis. In addition, a successful derivatives lawyer should be comfortable working with many people.

Understanding the Industry

Derivatives are complex financial instruments that are used to manage various risk exposures. These include price, interest rate, foreign exchange, and credit risks. The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) regulate the derivatives market.

A futures and derivatives attorney’s work involves financial market transactional and regulatory aspects. These attorneys often work with clients, including swap dealers, asset managers, financial institutions, investment advisers, hedge funds and private equity firms, clearing corporations, and securities and futures exchanges.

A skilled derivatives lawyer is essential to helping a business develop a successful strategy. These lawyers can help a business comply with the SEC and CFTC regulations and address other derivatives-related issues, such as netting, set-off, and cross-default provisions.

Moreover, they can help a company navigate the evolving legal landscape post-Dodd-Frank and ensure it complies with the law. This can save the company from costly fines and sanctions. Moreover, it can also save the company from losing valuable business opportunities.

Developing a Strategy

The world of derivatives is complex, and the law governing it is ever-changing in global markets. It would help if you had a partner who understands the new and evolving laws and has the experience to assist you in navigating this highly technical area.

Our Derivatives Group regularly counsels clients on the full spectrum of regulatory and compliance issues associated with derivative transactions. This includes handling Commodity Futures Trading Commission enforcement matters, defending private actions brought under the CFTC’s regulatory authority, challenging agency rulemaking, and advising on global market developments. We also represent financial institutions, commercial end-users, investment funds, and industry trade associations, assisting them in managing their business risks through derivative instruments.

Developing a Plan of Action

It’s easier to pick up a newspaper or watch the news after reading about another major corporate loss resulting from derivatives transactions that went awry. These high-profile losses send a clear message to senior management: Financial staff must be focused on the core business, not relying on global models and complex tools that will ultimately divert their attention from the nitty-gritty, analytical, control-and-coordination functions essential to the basic operation of the company.

Fortunately, lawyers specializing in this area of law can help companies navigate these difficult times. They can assist with identifying applicable laws and regulations, creating compliance plans, and helping clients negotiate business transactions. Additionally, they can handle Commodity Futures Trading Commission (CFTC) enforcement matters and defend private actions brought under the Commodity Exchange Act.

Developing a Team

The work of a derivatives attorney is both transactional and regulatory. They must understand how to implement various laws, including securities and commodities, tax, and bankruptcy laws. In addition, they must be able to negotiate contracts and resolve disputes. As a result, many futures and derivatives lawyers have a background in either the financial industry or business.

The group counsels financial institutions, commercial end-users, commodity trading advisors, hedge funds, investment funds, and market service providers on all aspects of the global derivatives legal landscape, from drafting, reviewing, and negotiating swap agreements to structuring complex and innovative transactions and documentation as well as addressing a full spectrum of regulatory issues. They have deep experience handling Commodity Futures Trading Commission (CFTC) enforcement actions, defending private actions brought under the CFTC’s Dodd-Frank Wall Street Reform and Consumer Protection Act, contested agency rulemaking, and advising on the impact of global regulatory change.

Like music or sports, mastering a career in derivatives takes hard work and the occasional long night. However, the rewards can be tremendous.

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